Follow the Money
The Hell With Everything ElseWatching the festival of college basketball known as "March Madness" over the last month, I discovered that the "madness" is not about hoops; it’s about money. No, not the money-driven college sports empire that masquerades as high-minded fiction about student-athletes balancing term papers and roundball, chasing extracurricular glory for the spirit of Alma Mater. That’s another column. I’m talking about your money, my money – the loot that belongs to us couch potatoes who pay mortgages and follow the tournament through office pools.
It’s our money on display during the NCAA Tournament, other televised sporting events, and, I suppose, other television period. Yeah, sure, the basketball was great, and Gonzaga rocked, but I’m talking about the commercials. Their unrelenting focus: money – wanting it, having it, investing it and especially worrying about it. The basketball was just filler, really, providing a brief respite from the deluge of products and services targeted at managing anxiety about how much cash I have, or don’t have, or should have.
Television advertising has become a collective electronic trade show of personal money management. Here, a commercial for a family of mutual funds, whose stalwart name and bespectacled managers are a reassuring buffer against the uncontrollable currents of market whimsy. There, an ad for an insurance company, with a comprehensive package of financial services that will safeguard my family from every known calamity (and a few as yet undiscovered). Here, a hyphenated brokerage firm, offering the alchemy of turning meager savings into 7,000-square- foot digs with a pool and 2.5 happy children scampering with a golden retriever across a green expanse of manicured lawn. There, a pitch for an on-line trading outfit that lets me adjust my portfolio before I do my next appendectomy. How did I ever survive without "real time quotes"?
Banks and financial services aren’t the only advertisers that fuel the obsession. The phone company wants me wired (or wireless) so that I can be in constant touch with my team of financial advisors and money managers. The PC maker assures me I can’t live without high speed networking that gives me instant access to the world of investing and trading. What good is a pager unless it provides financial headlines and stock quotes when it might otherwise be sitting mute waiting for a summons? The market’s off; good thing there’s Advil.
How and when did we develop this national fixation with watching our money every day, every hour, every minute? Is it just a faddish byproduct of a stock-driven economic boom, nourished by new and affordable technology that brings the immediacy of capital markets to anyone who wants it? Or is there some longer-term trend here, some manifest destiny that focuses our attention away from the communities we live in, and toward how we finance our own sequestered lives within those communities?
A defining trend is certainly the fundamental shift in the economics of retirement – away from "defined benefit" pensions and toward "defined contribution" plans. Traditional pension plans rewarded years of loyal employment service with specific and guaranteed pension payouts upon retirement. In its place are 401Ks, 403Bs, IRAs and other forms of defined contribution, where you control how much goes in, not how much comes out later. No longer a nation of workers toiling for a pension, we are a nation of investors picking mutual funds (and, for the adventurous, Internet startups).
The economics of stock market growth over the last seven years is also a factor. With year after year of double-digit returns, even those who are not anxious about retirement will have noticed that a 4 percent money market return leaves a lot of cash on the table. In this environment, the temptation to play the market is irresistible, even for small investors. The "market," of course, is what we literally should play – the overwhelming majority of mutual funds guided by expert money managers are outperformed by market indexes. But the quest for earnings unceasingly stokes a vast industry of funds and more funds that invite our bets.
This is all a good thing, right? Market worshippers say it fosters a culture of responsibility that puts each of us in control of our own financial destiny. This is partly true, but partly illusion. Yes, we have unprecedented control over our own investment options. But as individuals, we are still small investors at the mercy of markets dominated by institutions with different agendas than our own. The view from here – a sustained economic expansion – is pretty rosy. Long-term financial security, however, is only as solid as long-term market prosperity, which is to say, not very.
The culture of money rests on a myth of egalitarian participation that leads many to forget (or conveniently overlook) that financial investment and market gains are still disproportionately the province of wealthy Americans. This, in turn, propels stubborn conservative attempts to expand wealth inequality by gutting capital gains taxes. The mania for money management may have brought more Americans of modest means into the orbit of mutual funds, financial pages and rates of return. Fine and dandy. But it does little to arrest the expanding gap between rich and poor, and it signals a sacrifice of community for commodity. We know more about markets, but less about each other.
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